McKesson 2013 Annual Report Download - page 70

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible
that the amount of a loss will exceed the recorded provision. We review all contingencies at least quarterly to determine
whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of the loss can be
made. As discussed above, development of a meaningful estimate of loss or a range of potential loss is complex when the
outcome is directly dependent on negotiations with or decisions by third parties, such as regulatory agencies, the court system
and other interested parties. Such factors bear directly on whether it is possible to reasonably estimate a range of potential loss
and boundaries of high and low estimate.
Business Combinations: We account for acquired businesses using the acquisition method of accounting, which requires
that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess
of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Acquisition-related
expenses and related restructuring costs are expensed as incurred.
Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed. For
intangible assets, we typically use the income method. This method starts with a forecast of all of the expected future net
cash flows for each asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that
reflects the risk factors associated with the cash flow streams. Some of the more significant estimates and assumptions
inherent in the income method or other methods include the amount and timing of projected future cash flows, the discount
rate selected to measure the risks inherent in the future cash flows and the assessment of the asset's life cycle and the
competitive trends impacting the asset, including consideration of any technical, legal, regulatory, or economic barriers to
entry. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will
have different useful lives and certain assets may even be considered to have indefinite useful lives.
Recently Adopted Accounting Pronouncements
Comprehensive Income: In the first quarter of 2013, we adopted amended guidance on a retrospective basis related to the
presentation of other comprehensive income. The amended guidance requires that comprehensive income, the components of
net income and the components of other comprehensive income be presented either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. We elected to report other comprehensive income and
its components in a separate statement of comprehensive income. While the new guidance changed the presentation of
comprehensive income, there were no changes to the components that are recognized in net income or other comprehensive
income as determined under previous accounting guidance. The amended guidance did not have a material effect on our
consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
Balance Sheet Offsetting: In December 2011 and January 2013, disclosure guidance related to the offsetting of assets and
liabilities was issued. The guidance requires an entity to disclose information about offsetting assets and liabilities for
derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending
transactions that are either offset in accordance with specific GAAP criteria or subject to a master netting arrangement or
similar agreement. The amended guidance is effective for us on a retrospective basis commencing in the first quarter of 2014.
We do not expect the adoption of this guidance to have a material effect on our consolidated financial statements.
Comprehensive Income: In February 2013, disclosure guidance related to the reporting of amounts reclassified out of
Accumulated Other Comprehensive Income ("AOCI") was issued. The guidance requires disclosure of amounts reclassified
out of AOCI by component. In addition, an entity is required to present either on the face of the statement of operations or in
the notes, significant amounts reclassified out of AOCI by the respective line items of net income but only if the amount
reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not
reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional
detail about those amounts. This guidance is effective for us prospectively commencing in the first quarter of 2014. We do not
expect the adoption of this guidance to have a material effect on our consolidated financial statements.